LED crazy behind the hidden worry

When energy-saving and emission-reduction become an important goal of China's economic development, when the high-expected new energy technologies fail to mature as expected, LED technology will become the vanguard of the implementation of energy-saving emission reduction tasks, and China has become the main battlefield of global LED companies. Yesterday, the world's two major MOCVD (LED production epitaxial wafers that are light-emitting chips, a key part of the LED industry) technology equipment manufacturers, Vico Precision Instrument Co., Ltd. (hereinafter referred to as "Vico") announced that its China Training Center Officially launched, it will invest more than US$30 million in 2011 to expand its business in the Asia Pacific region.

LED feast Veeco's 2010 financial report shows that nearly 30% of its total revenue in 2010 came from the Chinese market, totaling US$267 million, a huge increase from the US$30 million in 2009. According to 2011 forecast data, its total revenue will exceed 1 billion US dollars, of which more than half will come from the Chinese market.

In fact, not only is Veeco, the world's leading LED manufacturers Philips, GE, Dakota, etc. have also set up their headquarters and research and development centers in mainland China. According to incomplete statistics, foreign capital invested in the domestic LED industry in 2010 totaled about 10 billion US dollars. Many Taiwanese companies are also involved in the mainland LED market, including more than a dozen well-known companies such as Jingdian, Delta Electronics, Yiguang, Qiang Mao, and Dongbei.

“The huge space for growth has made the Chinese market the main battlefield for LED. In terms of MOCVD equipment, the number of global shipments in 2009 was 288 units, of which the mainland’s new volume accounted for 12% of shipments; in 2010, total shipments reached 800 Taiwan, which accounts for 32% of the mainland, is expected to ship between 850 and 1,100 units worldwide in 2011, and mainland China will account for more than 60% of the total.” said John P, Global CEO of Veeco. Peeler told reporters that of course the Chinese government’s policy subsidies are also a potent drug for the rapid development of the market.

Under the stimulus of the policy, all capitals in the country are moving at an unprecedented speed. Data show that in 2010, the domestic LED lighting industry output exceeded 150 billion yuan, double compared to 2008.

Hidden Prospects Under the buoyant support of various capitals, LEDs seem promising, but there are still many hidden concerns behind their rapid growth.

According to the research report of GF Securities (000776), in the current LED lighting industry, government municipal engineering is still the main guide for LED lighting industry. The main LED products in the market are concentrated in landscape lighting, tunnel lighting, and street lighting. General lighting products, the real LED lighting market did not start. In 2010, LED's penetration rate in the entire lighting market in the country was only 1%. Many companies rely on government municipal projects to survive and rely on subsidies to make profits.

"The real opening of the LED market depends mainly on its lighting market, that is, LED lighting is accepted by the public, which needs to overcome high costs." However, John P. Peeler revealed that in the second half of this year, a company in the industry will launch a low-price LED bulb of US$5 each.

In addition, the frequent quality crisis also exposed a series of shortcomings in domestic LED companies' production technology capabilities, product quality and so on. It is reported that since 2011, there have been 3 reports of LED luminaire products that have met Europe, America and other countries and regions.